Panel Presentation on Thorny Issues in Maximizing Rent Premiums
John Doyle, MAI presented at NLHA’s 2019 Mid-Year Meeting on various nuances in rent maximization in the Rent Study process.
What is the role of the rent at a Section 8 HAP project to mitigate risk?
Consider the binary that we are addressing: too little risk, and the returns are too low to motivate development. Too much risk, and excess returns and supply lead to failure. Always recall that the market regresses to the mean.
From an owner’s perspective, there are two main goals: reposition and maximization.
Repositoning an asset, often through substantial rehabilitation, mitigates the risk of new construction and absorption in the market by staying competitive. Maximizing net income and debt ensures long-standing financial security, and the ability to take on new developments.
From a lender’s perspective, they are concerned about NOI and DSC, which are both driven by rents.
These rents are influenced by a myriad of factors that we establish in the Rent Study. These include the condition of the property, the curb appeal, services provided onsite, and the utility passthrough. The difficult issue of a Rent Study is determining the hypotheical condition of a difference consumer—establishing market rent.
Key Notes from John Doyle’s presentation
Owner opportunities: Aging-In-Place is do it yourself. 3rd Party Resident Service Coordinators
Light repositioning involves like-kind rehabilitation of units and common spaces to increase curb appeal and rents at minimal out-of-pocket cost.